FOR IMMEDIATE RELEASE

4Q20

Quarterly Management Report
January 14, 2021

Operating Results Review:
CONTACT
Jeff Su
Investor Relations Division
invest@tsmc.com
886-3-568-2089

Topics in This Report:


Revenue Analysis

Profit & Expense
AnalysisFinancial Condition
Review

Cash Flow

Summary:(Amounts are on consolidated basis and are in
NT$ billions unless otherwise noted)

4Q20

3Q20

4Q192020

2019

5.51
0.97
12.68
361.53
195.24
54.0%

5.30
0.90
12.14
356.43190.49
53.4%

4.47
0.73
10.39
317.24159.20
50.2%

19.97
3.39
45.51
1,339.26
711.1353.1%

13.32
2.15
34.63
1,069.99
492.7046.0%

Operating Expenses
Other Operating Income and Expenses
Operating Income
Operating Margin
Non-Operating Items
Net Income Attributable to Shareholders ofthe Parent Company(38.32)0.20
157.1243.5%
3.99
142.77(40.89)0.45
150.0542.1%
5.07
137.31(34.94)(0.02)
124.2439.2%
4.54
116.04(145.06)
0.71
566.7842.3%
18.00
517.89(119.50)(0.50)
372.7034.8%
17.15
345.26

Net Profit Margin

39.5%

38.5%

36.6%

38.7%

32.3%

Wafer Shipment (kpcs 12 inch-equiv.)

3,246

3,240

2,823

12,39810,068EPS (NT$ per common share)(US$ per ADR unit)

Net Revenue (US$ billions)
Net Revenue
Gross Profit
Gross Margin

Note: Diluted weighted average outstanding shares were 25,930mn units in 4Q20

CapEx

Recap of Recent
Important Events &Announcements

Financial Highlights:
Fourth Quarter 2020
Net revenue was NT$361.53 billion, representing a 1.4% increase fromNT$356.43 billion in 3Q20 and a 14.0% increase from NT$317.24 billion
in 4Q19.

Gross margin was 54.0%, 0.6 percentage point higher than 3Q20 and3.8 percentage points higher than 4Q19.



Operating margin was 43.5%, up 1.4 percentage points from 3Q20 andup 4.3 percentage points from 4Q19.



Non-operating items were a gain of NT$3.99 billion, compared to a gainof NT$5.07 billion in 3Q20 and a gain of NT$4.54 billion in 4Q19.



Net income attributable to shareholders of the parent company wasNT$142.77 billion, up 4.0% from 3Q20 and up 23.0% from 4Q19. Net
profit margin was 39.5% and diluted EPS was NT$5.51.

Full Year 2020
Net revenue was NT$1,339.26 billion, representing a 25.2% increase
from 2019. In US dollar terms, net revenue increased 31.4% to
US$45.51 billion in 2020.

Gross margin was 53.1%, up 7.1 percentage points from 46.0% in 2019.
Operating margin was 42.3%, up 7.5 percentage points from 34.8% in2019.



Diluted EPS was NT$19.97, up 50.0% from NT$13.32 in 2019. Net profit
margin was 38.7%, up 6.4 percentage points from 32.3% in 2019.

TSMC
January 14, 2021

Page 2I. Revenue Analysis
Wafer Revenue by Technology

4Q20 3Q20 4Q195nm

20%

8%0%

7nm

29%

35%

35%

10nm0%

0%

1%

16nm

13%

18%

20%

20nm

1%

1%

1%

28nm

11%

12%

13%

40/45nm

8%

8%

8%

65nm

5%

5%

7%

90nm

2%

2%

3%

0.11/0.13um

3%

2%

3%

0.15/0.18um

7%

7%

8%

0.25um and above

1%

2%

1%

Net Revenue by Platform

4Q20 3Q20 4Q19

Smartphone

51%

46%

53%

High Performance Computing

31%

37%

29%

Internet of Things

7%

9%

8%

Automotive

3%

2%

4%

Digital Consumer Electronics

4%

3%

3%

Others4%

3%

3%

Net Revenue by Geography

4Q20 3Q20 4Q19

North America

73%

59%

Asia Pacific

12%

10%

8%

China

6%22%

22%

EMEA

5%

5%6%

Japan

4%

4%5%

Wafer Revenue by Technology
5nm
7nm
10nm
16nm
20nm
28nm
40/45nm
65nm
90nm
0.11/0.13um
0.15/0.18um
0.25um and above

2020
8%
33%
0%
17%
1%
13%
9%
5%
2%
3%
7%
2%

2019
0%
27%
3%
20%
1%
16%
10%
8%
3%
2%
8%
2%

Net Revenue by Platform
Smartphone
High Performance Computing
Internet of Things
Automotive
Digital Consumer Electronics
Others

2020
48%
33%
8%
3%4%4%

2019
49%
30%
8%
4%
5%
4%

Net Revenue by Geography
North America
China
Asia Pacific
EMEA
Japan

2020
62%
17%
11%
5%5%

2019
60%
20%
9%
6%
5%

59%

Revenue Analysis:
In the fourth quarter, revenue increased 1.4% quarterover-quarter, mainly driven by strong 5nm demand forsmartphone and HPC-related applications.
By technology, 5nm process technology contributed
20% of total wafer revenue in 4Q20 while 7nm and16nm accounted for 29% and 13% respectively.
Advanced technologies (16nm and below) accounted
for 62% of total wafer revenue.
By platform, Smartphone represented 51% and HPC
31% of net revenue, while IoT, Automotive, DCE, andOthers each represented 7%, 3%, 4%, and 4%.
Sequentially, revenue from Smartphone, Automotive,DCE and Others increased 13%, 27%, 29%, and 10%
respectively from 3Q20, while HPC and IoT decreased
14% and 13% respectively.
From a geographic perspective, revenue fromcustomers based in North America accounted for 73%
of total net revenue, while revenue from Asia Pacific,China, EMEA (Europe, Middle East, and Africa) andJapan accounted for 12%, 6%, 5%, and 4% of total net
revenue respectively.
On a full year basis, 5nm contribution reached 8% of
total wafer revenue in 2020. 7nm process technology
contributed 33% while 16nm accounted for 17%
respectively. Advanced technologies (16nm and below)
accounted for 58% of total wafer revenue, up from 50%
in 2019.
By platform, revenue from Smartphone, HPC, IoT, DCE
and others increased 23%, 39%, 28%, 2% and 5%
respectively from 2019, while Automotive decreased
7%.
In 2020, revenue from customers based in North
America accounted for 62% of total net revenue, while
revenue from China, Asia Pacific, EMEA (Europe,Middle East, and Africa) and Japan accounted for 17%,11%, 5%, and 5% of total net revenue respectively.

TSMC
January 14, 2021

Page 3

II. Profit & Expense Analysis

Gross Profit Analysis:

II - 1. Gross Profit Analysis(In NT$ billions)

4Q20

3Q20

4Q192020

2019

Net Revenue

361.53356.43317.24

1,339.26

1,069.99

Cost of Revenue(166.29) (165.94) (158.04)(628.13)(577.29)

Gross Profit

195.24

190.49159.20711.13492.70Gross Margin

54.0%

53.4%

50.2%

53.1%

46.0%

Gross margin was 54.0% in 4Q20, 0.6 percentage point
higher than 3Q20, mainly due to cost improvement,
partially offset by N5 dilution and an unfavorable
exchange rate.
On a full year basis, gross margin was 53.1% in 2020,
up 7.1 percentage points from 2019, mainly reflecting ahigher level of capacity utilization and cost
improvement, partially offset by N5 dilution and an
unfavorable exchange rate.

Operating Income Analysis:

II - 2. Operating Income Analysis(In NT$ billions)

4Q20

3Q20

4Q192020

2019

Total Operating Expenses(38.32)(40.89)(34.94)(145.06)(119.50)

Research & Development(29.94)(29.68)(25.63)(109.49)(91.42)

SG&A(8.38)(11.21)(9.31)(35.57)(28.08)Other Operating Income andExpenses

0.20

0.45(0.02)

0.71(0.50)

Operating Income

157.12150.05124.24566.78372.70Operating Margin

43.5%

42.1%

39.2%

42.3%

34.8%

Total Operating Expenses as% of Net Revenue

10.6%

11.4%

11.0%

10.8%

11.2%

Total operating expenses decreased NT$2.57 billion to
NT$38.32 billion in 4Q20, mainly due to the absence ofexpenses to facilitate the expansion in Hsinchu.
For full year 2020, total operating expenses
represented 10.8% of net revenue, compared to 11.2%
in 2019.

Non-Operating Items:

II - 3. Non-Operating Items
4Q20

3Q204Q192020

2019

L-T Investments

1.36

0.83

0.87

3.59

2.84

SSMC

0.29

0.12

0.27

0.82

0.89

Others

1.07

0.71

0.60

2.77

1.95

Net Interest Income (Expenses)

0.88

1.52

2.67

6.94

12.94

Other Gains and Losses

1.75

2.72

1.00

7.47

1.37

Total Non-Operating Items

3.99

5.07

4.54

18.00

17.15

On a full year basis, total non-operating items increasedby NT$0.85 billion to a gain of NT$18.00 billion in 2020.

Net Profit and EPS:(In NT$ billions)

II - 4. Net Profit and EPS

4Q20

3Q20

4Q192020

2019

Income before Tax

161.11

155.12128.78584.78389.85

Income Tax Expenses(18.29)(17.74)(12.70)(66.62)(44.51)

Effective Tax Rate

11.4%

11.5%

9.9%

11.5%

11.5%

Total non-operating items were a gain of NT$3.99 billion
in 4Q20, compared to a gain of NT$5.07 billion in 3Q20.
The decrease was mainly due to lower net interest
income and lower foreign exchange gains after
hedging.

(In NT$ billions)

Net Income Attributable to theParent Company

142.77137.31116.04517.89345.26

Net Profit Margin

39.5%

38.5%

36.6%

38.7%

32.3%

EPS (NT$ per common share)

5.51

5.30

4.47

19.97

13.32

Net income attributable to shareholders of the parentcompany was NT$142.77 billion in 4Q20, up 4.0% from
3Q20 and up 23.0% from 4Q19.
On a full year basis, both net income and EPS
increased by 50.0% from 2019.

TSMC
January 14, 2021

Page 4

III. Financial Condition Review
Liquidity Analysis:

III - 1. Liquidity Analysis(Balance Sheet Items)(In NT$ billions)

4Q20

3Q20

4Q19

Cash & Marketable Securities

791.48742.42583.45

Accounts Receivable

146.04

162.58139.77

Inventories

137.35109.51

82.98

Other Current Assets

17.31

15.16

16.42

Total Current Assets

1,092.18

1,029.67

822.62

Short-term Loans

88.56

155.38118.52

Accounts Payable

198.90141.53181.02Current Portion of Bonds Payable

2.60

2.60

31.80

Dividends Payable

129.65129.65129.65

Accrued Liabilities and Others

197.44159.08129.75

Total Current Liabilities

617.15588.24590.74

1.8

1.8

1.4

475.03441.43231.88Current Ratio (x)Net Working Capital

Cash and marketable securities increased by NT$49.06
billion from 3Q20 to NT$791.48 billion in 4Q20.
Total current liabilities increased by NT$28.91 billion,
mainly due to the increase of NT$57.37 billion inaccounts payable and the increase of NT$38.36 billion
in accrued liabilities and others, offset by the decreaseof NT$66.82 billion in short-term loans.
Net working capital was NT$475.03 billion and current
ratio was 1.8x in 4Q20.

Receivable and Inventory Days:
III - 2. Receivable/Inventory Days
(In Number of Days)

4Q20

3Q20

4Q19

Days of Receivable

394041

Days of Inventory

735855

Days of receivable decreased 1 day to 39 days in
4Q20.
Days of inventory increased 15 days to 73 days,
primarily due to the ramp of leading nodes.

Debt Service:III - 3. Debt Service(In NT$ billions)

4Q20

3Q20

4Q19

Cash & Marketable Securities

791.48742.42583.45Interest-Bearing Debts(347.23)(386.01)(175.42)

Net Cash Reserves

444.25356.41408.03

Net cash reserves increased NT$87.84 billion toNT$444.25 billion in 4Q20.
Interest-bearing debts decreased NT$38.78 billion,
mainly due to the decrease in short-term loans ofNT$66.82 billion, partially offset by the issuance ofbonds of NT$30.50 billion.

TSMC
January 14, 2021

Page 5

IV. Cash Flow
Summary of Cash Flow:

IV - 1. Quarterly Cash Flow Analysis(In NT$ billions)

4Q20

3Q20

4Q19

Income before Tax

161.11

155.12128.78Depreciation & Amortization

97.56

94.73

67.53

Other Operating Sources/(Uses)

0.46(59.67)

6.65

Net Operating Sources/(Uses)

259.13190.18202.96

Capital Expenditures(88.68)(99.31)(170.01)

Marketable Financial Instruments(1.52)

0.33(0.58)

Other Investing Sources/(Uses)(0.76)

2.90(1.02)Net Investing Sources/(Uses)(90.96)(96.08)(171.61)

Short-term Loans(67.35)(16.80)35.68

Cash Dividends(64.83)(64.83)(51.86)

Bonds Payable

30.50

136.03

0.00

Other Financing Sources/(Uses)

0.47(6.96)(1.00)Net Financing Sources/(Uses)(101.21)47.44(17.18)Exchange Rate Changes(10.99)(4.95)(11.20)Cash Position Net Changes

55.97

136.592.97

Ending Cash Balance

660.17604.20455.40IV - 1.2. Annual Cash Flow Analysis(In NT$ billions)

2020

2019

Diff.

Income before Tax

584.78389.85

194.93

Depreciation & Amortization

331.73286.8844.85

Other Operating Sources/(Uses)(93.84)(61.59)(32.25)Net Operating Sources/(Uses)

822.67615.14207.53

Capital Expenditures(507.24)(460.42)(46.82)Marketable Financial Instruments

0.31(10.79)

11.10

Other Investing Sources/(Uses)

1.15

12.41

(11.26)Net Investing Sources/(Uses)(505.78)(458.80)(46.98)

Short-term Loans(31.57)31.80(63.37)

Cash Dividends(259.30)(259.30)

0.00

Bonds Payable

204.93(34.90)239.83

Other Financing Sources/(Uses)(2.68)(7.24)

4.56

Net Financing Sources/(Uses)(88.62)(269.64)181.02

Exchange Rate Changes(23.50)(9.11)(14.39)Cash Position Net Changes

204.77(122.41)

327.18Ending Cash Balance

660.17455.40204.77

During the fourth quarter, cash generated fromoperating activities totaled NT$259.13 billion, including
NT$161.11 billion from income before tax and NT$97.56
billion from depreciation & amortization expenses.
Net cash used in investing activities was NT$90.96
billion in 4Q20, primarily attributable to capital
expenditures of NT$88.68 billion.
Net cash used in financing activities was NT$101.21
billion, mainly due to the decrease in short-term loans of
NT$67.35 billion and the payment of 1Q20 cash
dividends, partially offset by the net change in bonds
payable of NT$30.50 billion.
As a result, cash position increased NT$55.97 billion toNT$660.17 billion at the end of 4Q20.

On a full year basis, cash generated from operating
activities totaled NT$822.67 billion, including (1)NT$584.78 billion from income before tax, (2)NT$331.73 billion from depreciation & amortization, and(3) NT$93.84 billion for other operating uses, whichmainly included income tax payment and net changes
in working capital.
Net cash used in investing activities was NT$505.78
billion, primarily including capital expenditures ofNT$507.24 billion.
Net cash used in financing activities totaled NT$88.62
billion, mainly reflecting the payment of cash dividends,
partially offset by the increase in bonds payable.
At the end of 2020, cash position was NT$660.17 billion.

TSMC
January 14, 2021

Page 6

IV - 2. Free Cash Flow
(In NT$ billions)Operating and Free Cash Flow:Free Cash Flow
Operating Cash Flow
CAPEX

300

Free cash flow increased NT$79.58 billion toNT$170.45 billion in 4Q20, mainly due to higher
operating cash flow.

250

200
150100
500

4Q20

3Q20

2Q20

1Q20

(In NT$ billions)

4Q20

3Q20

2Q20

1Q20

Free Cash Flow

170.45

90.87

43.64

10.47

Total free cash flow generated in 2020 was NT$315.43billion, an increase from NT$154.72 billion in 2019, as
operating cash flow increased faster than capital
expenditures in 2020.

V. CapEx
Capital Expenditures:

V. Capital Expenditures(in US$ billions)

Capital Expenditures

4Q203.19

3Q20

2Q20

1Q202020

3.42

4.24

6.39

17.24

Capital expenditures for TSMC on a consolidated basis
totaled US$3.19 billion in 4Q20 and US$17.24 billion
for the year.

TSMC
January 14, 2021

Page 7

VI. Recap of Recent Important Events & Announcements


TSMC Recognized with 2021 IEEE Corporate Innovation Award (2020/12/09)

TSMC Recognizes Outstanding Suppliers at 2020 Supply Chain Management Forum (2020/12/03)

TSMC Board of Directors Approved an Investment to Establish a Wholly-Owned Subsidiary inArizona, U.S., with a Paid-in Capital of US$3.5 Billion (2020/11/10)

TSMC Board of Directors Approved NT$2.5 Cash Dividend for the Third Quarter of 2020 and Set
March 17 as Ex-Dividend Date, March 23 as the Record Date and April 15, 2021 as the Distribution
Date (2020/11/10)

TSMC Announces 2020 OIP Partner of the Year Awards for Excellence in Accelerating SiliconInnovation (2020/10/20)